We are in February 2014, and it is
time to look at how key countries and zones in the
world are expected to perform for the calendar year.
The January 2014 update of the World Economic
Outlook of the International Monetary Fund (IMF)
suggests an uptick in global GDP growth from 3 per
cent in 2013 to 3.7 per cent in 2014. Through most
of the past decade, whenever there was an upward
movement in global GDP growth, you could be sure
that it was driven by the emerging economies. Not so
this time.
The advanced economies are expected to up their real
GDP growth by 90 basis points — from 1.3 per cent in
2013 to 2.2 per cent in 2014. In contrast, the
emerging economies, while growing faster, have been
predicted to post GDP growth of 5.1 per cent in
2014, which is only 40 basis points higher compared
to 2013.
The problem lies with laggard growth increments
among the BRIC nations. Though the fastest growing
by far, China is forecast to de-grow from 7.7 per
cent in 2013 to 7.5 per cent in 2014. Brazil’s
growth is expected to remain flat at 2.3 per cent.
While Russia is anticipated to grow from 1.5 per
cent in 2013 to 2 per cent in 2014, it is still well
below par.
India looks better in comparison: up from 4.6 per
cent in 2013 to 5.4 per cent this calendar year.
That is good news. However, India does not carry
enough heft to substantially lift the growth of
emerging markets, unless it is accompanied in good
measure by China.
Thankfully, there are two distinct pieces of good
news. The first relates to the US, where almost all
indicators suggest that the country is on the mend.
The unemployment rate has been declining and finally
went below the 7 per cent mark to 6.7 per cent in
December 2013. The last time it was at this level
was 61 months ago. US industrial production has
grown by 3.7 per cent between December 2012 and
December 2013. It was the fifth consecutive monthly
increase; and for the fourth quarter of 2013
(October-December), industrial production grew at an
annual rate of 6.8 per cent — the largest quarterly
increase since the second quarter of 2010. At 1.5
per cent, consumer price inflation has been lower
than before; the fiscal deficit of the federal
government, once running at over 11 per cent of GDP,
is now down to 4.1 per cent; housing prices are
firming up; and the consumer confidence index has
bounced back.
The second good news is probably even better for the
global economy. It has to do with the Euro Zone
which, except for Germany and the North Atlantic
nations, was almost a basket-case category some 12
to 18 months ago. Not so today. Although Euro Zone
growth for 2013 will still be in negative territory
(-0.4 per cent), the third quarter numbers showed a
distinct upturn which should continue in the fourth.
The World Economic Outlook forecasts 1 per cent
growth for the area in 2014, with Germany leading
the pack at 1.6 per cent, followed by France at 0.9
per cent. Most significantly, both Italy and Spain
are expected to get out of the red — the former from
-1.8 per cent in 2013 to 0.6 per cent 2014, and the
latter from -1.2 per cent to 0.6 per cent.
These are trivial growth rates by Asian standards,
but substantial for nations that were floundering
without hope. Moreover, the Euro Zone is again
seeing a rise in industrial output led by Germany; a
healthy current account surplus; a mild drop in
unemployment rates; and a sharp reduction in fiscal
deficit to 2 per cent of GDP.
There is an economic recovery in sight. Therefore,
we in India should not face too many headwinds. If
we don’t grow sufficiently, the fault will lie upon
us, and not the big bad world. We should aim for 5.5
per cent, and hope for 6.
Published: Business World, February 2014
